DTE Energy 2012 Annual Report Download - page 47
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Table of Contents
Quantitative and Qualitative Disclosures About Market Risk
DTE Energy has commodity price risk in both utility and non-utility businesses arising from market price fluctuations.
The Electric and Gas businesses have risks in conjunction with the anticipated purchases of coal, natural gas, uranium, electricity, and base metals to
meet their service obligations. However, the Company does not bear significant exposure to earnings risk as such changes are included in the PSCR and GCR
regulatory rate-recovery mechanisms. In addition, changes in the price of natural gas can impact the valuation of lost and stolen gas, storage sales revenue and
uncollectible expenses at the Gas segment. Gas segment manages its market price risk related to storage sales revenue primarily through the sale of long-term
storage contracts. The Company is exposed to short-term cash flow or liquidity risk as a result of the time differential between actual cash settlements and
regulatory rate recovery.
Our Gas Storage and Pipelines business segment has exposure to natural gas price fluctuations which impact the pricing for natural gas storage and
transportation. The Company manages its exposure through the use of short, medium and long-term storage and transportation contracts.
Our Power and Industrial Projects business segment is subject to electricity and natural gas product price risk. To the extent that commodity price risk
has not been mitigated through the use of long-term contracts, we manage this exposure using forward energy, capacity and futures contracts.
Our Energy Trading business segment has exposure to electricity, natural gas, coal, crude oil, heating oil, and foreign currency exchange price
fluctuations. These risks are managed by our energy marketing and trading operations through the use of forward energy, capacity, storage, options and
futures contracts, within pre-determined risk parameters.
Bankruptcies
The Company purchases and sells electricity, gas, coal, coke and other energy products from and to governmental entities and numerous companies
operating in the steel, automotive, energy, retail, financial and other industries. Certain of its customers have filed for bankruptcy protection under Chapter 11
of the U.S. Bankruptcy Code. The Company regularly reviews contingent matters relating to these customers and its purchase and sale contracts and records
provisions for amounts considered at risk of probable loss. The Company believes its accrued amounts are adequate for probable loss. The final resolution of
these matters may have a material effect on the consolidated financial statements.
Other
We engage in business with customers that are non-investment grade. We closely monitor the credit ratings of these customers and, when deemed
necessary, we request collateral or guarantees from such customers to secure their obligations.
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